When was amex founded

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Join Stock Advisor Discounted offers are only available to new members. Stock Advisor launched in February of Related Articles. Roosevelt announced a national bank holiday to allow banks to recover from the panic.

The bank holiday brought commerce to a virtual standstill. During this period American Express, since it was not a bank and thus not required to close, enjoyed a tremendous advantage: it remained open and redeemed traveler's checks, providing the only financial services available to individuals and merchants while the nation's assets were frozen.

In Ralph T. Reed replaced Small as president. Under Reed's management, the late s and the s were a period of expansion, primarily in the booming travel industry. Within seven years the number of American Express offices increased by percent and international operations surpassed their prewar level.

When Diners Club introduced the first credit card in the mids, American Express executives proposed investigating this new line of business. Reed, who thought the company should improve existing business and feared a credit card would threaten its traveler's check business, opposed the proposal. In , Reed reversed himself and the American Express travel-and-entertainment card the American Express green card was introduced virtually overnight. The company had , to , applications for cards on hand the day the card went on the market, and , cardmembers within three months.

A new era of management began when Howard L. Clark was elected president and CEO on April 26, Clark transformed American Express from a renowned but fairly small company to a corporate giant with diverse interests. Clark's goal was to establish a balanced earnings base dependent on multiple sources and thus more resistant to economic fluctuations.

His strategy was to expand American Express's business within its areas of expertise--travel and financial services. However, before Clark could put his plan in operation, the company had to be streamlined and modernized.

Management had long been centralized and the chain of command obscure. Clark gave each division room to innovate and made each directly responsible for its own performance. Also, the company had no uniform identity.

The now famous 'blue box' logo was developed at Clark's direction and adopted by all the divisions. Next, the company's accounting system had to be overhauled, since the system then in place was obsolete and unable to handle the high volume of charge card transactions.

Moreover, the travel division the glue that held the various divisions together and gave the company its identity had to improve its profitability.

By the time the jet airline industry made an impact on commercial travel, American Express was ready. Also, the charge card had yet to show a profit, in large part because American Express had no experience dealing directly with merchants and consumers or with credit controls. Clark brought in George Waters, formerly of IBM and the Colonial Stores supermarket chain, to put the charge card division on a sounder footing. Waters used two simple strategies: first, he raised the card fee and merchant discount; next, he persuaded merchants to think of American Express as their marketing partner by dedicating.

By the end of more than , cards had been issued, and by the end of the card division had shown a profit. Finally, marginal operations had to be divested. When the field warehousing division was sold to Lawrence Warehouse Co. Late that year, Clark decided to sell the two accounts to Lawrence Warehouse.

An independent audit conducted prior to closing revealed that about million tons of vegetable oil was missing. The American Express board realized the company's reputation was at stake and quickly issued a statement to the effect that American Express assumed moral responsibility for the losses caused by its subsidiary. American Express's assurances did little to appease those defrauded.

With the salad oil episode behind it and reorganization of the divisions completed, the late s and early s were good years for American Express. Consolidated net income grew steadily, and Clark concentrated on expanding the company's financial services.

In , American Express acquired W. Two years later, American Express made the most important purchase yet in its diversification strategy: the Fireman's Fund Insurance Company, one of the largest property and casualty insurers in the nation.

Even the international monetary crisis of , culminating in the devaluation of the dollar and the suspension of almost all dollar transactions, did not phase American Express. The company honored its traveler's checks at the exchange rate posted before trading was suspended and its card continued to be accepted internationally. American Express extended emergency funds to thousands of tourists caught short abroad, and its international banking subsidiary advised corporate clients on how to protect their foreign assets and import-export payments during the crisis.

During the late s, however, American Express seemed to lose its direction, and its integrity and soundness were challenged on many fronts.

In , the Washington Post suggested that American Express was successful only because it was not regulated as banks and other financial institutions were.

When Visa and MasterCard started competing in the traveler's check market, Citicorp, a major issuer of bank credit cards, took out a full-page advertisement accusing American Express of false and deceptive advertising of its traveler's checks.

American Express also received unfavorable publicity when four acquisition attempts in a row failed. Roger Morley who had replaced James D. After American Express bid for the publisher, McGraw-Hill sued the company and Morley, accusing them of breach of trust and corporate immorality. But in American Express made the big acquisition it had been looking for when it bought Shearson Loeb Rhoades Inc. Sanford I. Weill, formerly of Shearson Loeb Rhoades Inc. Under Weill, American Express continued to expand.

That same year, American Express acquired Ayco Corp. Also in , Shearson acquired Lehman Bros. In American Express announced that it would spin off Fireman's Fund Insurance Company, the property and casualty insurer it had purchased in Stiff competition in the insurance industry during the early s had led to price wars, and the subsidiary's profits had been declining since The first public offering of Fireman's Fund stock was made in October ; by December , American Express retained only 31 percent of the company.

In its holding was reduced to 20 percent and American Express formally exited the insurance business. In the mids, American Express was a thoroughly international company; its bank, with a presence in more than 40 countries, completed the range of financial services the company offered, focusing on private banking for wealthy individuals. The year was a dramatic--and difficult--one at most financial companies, and American Express was no exception.

That year it introduced its Optima Card, American Express's first credit card regular American Express cards are charge cards; the balance must be paid in full each month. By late , Optima had garnered some 2. In the s, as competition in the card industry intensified, American Express pursued both an increased customer and merchant base. At the beginning of the decade, American Express had ten million cardmembers who had roughly , places to use their cards.

By the end of the decade those numbers had grown to 33 million cardholders around the world whose cards were accepted at 2. But sheer size was not the objective: American Express emphatically positioned its services as 'premium'--its card cost much more than credit cards, like Visa and MasterCard, offered by banks, and it charged merchants a higher percentage of the bills charged to the card than its competitors did.

These higher fees to merchants were warranted, the company told them, by the business its generally high-income cardmembers generated; the higher card dues bought better services. Nevertheless, American Express ran into heavy competition, especially abroad, where its greatest hopes for expansion lay. At the beginning of , Shearson made another dramatic acquisition when it bought E.

Hutton and became Shearson Lehman Hutton. Such growth in so short a time added up to a second year of decreased earnings--a five percent drop on top of 's 70 percent drop. At the end of Shearson was still struggling to cut costs and raise profits. The rest was to come from notes. American Express toppled from its perch as the preeminent charge card due to a number of serious problems in the early s. The flagship charge card suffered fading customer loyalty, intense competition from lower-priced bank cards, and loss of service establishments accepting the card because of high fees to the merchants.

Some observers blamed advertising for a public relations fiasco that damaged the company's image. At the same time, the Travel Related Services unit was battered by competition from no-fee bank cards and debit cards. As a recession deepened, merchants dropped the high-fee American Express card in droves.

In , Harvey Golub advanced to American Express's chief executive office upon the resignation of Robinson, who had served in that capacity since He instituted several recovery strategies at the firm, including retrenchment to core businesses, new product launches, cost-cutting, and brand-building.

Part of American Express's recovery strategy involved aggressive brand promotion, launching what were derisively called 'guerrilla' or 'ambush' marketing campaigns. In response to a Visa advertising campaign tied to the Olympic Games, American Express engaged in a campaign in which it ran television and space ads featuring those cities where the Olympics were held, trying to affiliate itself with the games without directly sponsoring them.

American Express also launched a legal battle with Visa, claiming that the rival's 'But they don't take American Express' commercials implied broader exclusivity than existed.

Visa retorted that its ad claims were valid, and that American Express was simply using legal maneuvers, public relations, and newspaper ads to blunt its advertising effectiveness. Early in , Gary Levin, of Advertising Age, declared that 'neither is entirely blameless, and both are unlikely to surrender. The company planned to take 60 new ads to 30 countries around the world. American Express's new products included Cheques for Two, introduced in ; a Senior Member card featuring special services and benefits; and a corporate purchasing card.

In , American Express won the federal government's travel and transportation payment system contract--the largest corporate card account in the world. Some industry analysts interpreted the introduction of these new products as a sign of 'renewed vigor' at American Express. He also made several divestments that brought funds to the company and helped refocus on core businesses. The capital injection enabled Lehman Brothers to sustain an 'A' credit rating as an independent venture.

That year, American Express's worldwide charge volume increased 5. One of Golub's main objectives was to expand American Express's foreign operations, to the point where international revenues accounted for 50 percent of the company's total earnings. In American Express signed ten new agreements with overseas partners and introduced 20 new card products into foreign markets, including cobranded corporate cards with France's Credit Lyonnais and Qantas Airlines in Australia.

Although disturbances in the Asian economy during this period caused American Express to fall far short of its desired annual international growth rate of percent, the company continued to carve a niche in developing foreign markets. In early it formed a branch of American Express Financial Advisors in Japan, and in it established a strategic position in the burgeoning Chinese economy by opening a headquarters in Beijing. American Express's range of financial services demonstrated consistent growth throughout the late s.

In the company launched American Express Financial Direct, which offered financial products directly to its customers. The Internet revolution provided American Express with the opportunity to explore new avenues for its banking and travel interests.

In January the company launched ExpressNet, a web site dedicated to online cardmember and travel services. In April it formed American Express Travel on the Web, and later that year it created InvestDirect, an extensive online securities trading service.

That same year, a new member web site gave American Express cardholders complete access to their accounts online. With increased electronic traffic came concerns over Internet security and privacy. In July American Express joined forces with four leading technology firms to develop a means of ensuring secure online business transactions, through sophisticated encryption codes and a digital signature authentication system.

In February American Express signed a licensing agreement with Microsoft to develop a software that employed secure electronic transactions SET protocol, and in the company partnered with Hewlett-Packard to create ExpressVault, which combined Hewlett-Packard's security and computing expertise with the American Express payment processing network.

The battle over the credit and charge card market intensified in , when the federal government filed an antitrust lawsuit against Visa and MasterCard. The Justice Department's findings focused on the competitors' policy of prohibiting member banks from issuing cards of rival companies, most notably American Express and Discover.

Charging that this practice was anticompetitive, the Justice Department accused Visa and MasterCard of discouraging product innovation and ultimately hurting consumers.

Another intriguing development in the card wars came in September , when American Express launched Blue, the first 'smart card' offered in the United States. Embedded with a computer chip in addition to the traditional magnetic strip, Blue made it possible for consumers to consolidate their credit and debit information in a single card. As more and more computer manufacturers began including smart card 'readers' as standard features on personal computers by decade's end, Blue's design made it ideal for e-commerce.

While it remained to be seen whether smart cards would become the industry standard, by the end of there were approximately four million Blue cardholders. In addition, Visa launched its own smart card during the Olympics, ensuring that the new market would be competitive.